Midsona AB (publ) ($MSONB)

Welcome to Midsona Q1 Report 2026 presentation. [Operator Instructions] Now I will hand the conference over to the speakers, President and CEO, Henrik Hjalmarsson; and CFO, Niclas Lundin. Please go ahead.

Good morning, everybody, and welcome to this presentation of Midsona's First Quarter 2026 Results. My name is Henrik Hjalmarsson. I am the President and CEO. And with me, I have Niclas Lundin, CFO. I'm going to spend the coming 10, 15 minutes going through the highlights of the first quarter, after which Niclas will go through a bit of the details on the financials. And there will be plenty of time to ask questions at the end. But first of all, for those who are new to Midsona, a brief introduction. So we are a provider of good for you and good for the world, mainly food products, most of which are plant-based and/or vegetarian and many are natural and organic. We are present and divided in 3 divisions: the Nordics in Sweden, Norway, Finland and Denmark; Division North in Germany; and Division South, which is France and Spain, and had a bit more than SEK 3.6 billion of revenue last year, headquartered in Malmö and listed on the Stockholm Stock Exchange since 1999. With that, let's start with a brief summary of the first quarter. And actually, looking at the table on the right-hand side, starting in the top left-hand corner, sales. Sales in the quarter was 1.3% down organically, mainly driven by contract manufacturing and licensed brands, however, partially offset by organic growth within our own consumer brands, which grew in the quarter by 0.1%. We saw a continued negative sales impact from the fire in Spain, which is then visible in the contract manufacturing decline. Going one box down, looking at gross margin, we saw a healthy gross margin growth, up 1.2 percentage points to 29.8%, driven by both mix, pricing as well as production efficiency. And together with the impact from the cost saving program, which is contributing to lower overall cost levels, as we can see in the top right-hand corner, EBIT margin grew by 1.1 percentage points to 5.0%, which then means that EBIT came in SEK 8 million higher than the same quarter last year at SEK 45 million. Cash flow was obviously supported by the previously announced insurance settlement in Spain, but at the same time, negatively impacted by an inventory build to support launches in the second quarter as well as to mitigate some of the supply risk linked to longer transportation lead time from the ongoing conflict in the Middle East, but also temporary negative impact on receivables that we expect will normalize during Q2. And all in all, that meant that the net debt-to-adjusted EBITDA came down considerably from 1.5x last year to 0.9x this year. Looking then at the performance and the highlights in the divisions, starting with Division Nordics. In the Nordics, we saw an organic sales decline of 3.3%, which was driven then by the timing of launch window into Swedish trade as well as promotional timing, but partially also due to conscious optimization for profit, particularly within contract manufacturing within Health Foods. This was, however, partially mitigated then by a continued strong sales growth on our own organic brands. We saw a strength in gross margin with both positive net price impact as well as a good mix, and a materially improved EBIT margin then, supported by the implementation of the cost saving program, which led to improved overhead efficiency. And all in all then an EBIT growth of 15% year-over-year. Looking at Division North, we saw an organic sales growth of 4.2%, very much fueled by a good growth of our own consumer brands. Our own B2B brand, however, is impacting sales development negatively with a negative organic sales development, but that is a conscious effect of a transition to a more profitable assortment and business model that we're in the midst of implementing. Gross margin weakened somewhat with a worsened mix within contract manufacturing that is not fully mitigated by the improved segment mix with, as I mentioned, the growth on our own consumer brands. Looking at the Division South, we saw an organic sales decline of 5.9%, but then mainly driven by the lower contract manufacturing volumes in Spain following the fire in Spain in the middle of last year. Our own consumer brands grew by 2.9% with a continued strong growth in the French grocery trade, and we saw materially improved gross margin driven by continued efficiency improvements as well as then an improved sales mix with a good growth on our own consumer brands. Looking at it from the portfolio perspective, starting with the organic products, where we saw -- on organic products, saw an organic growth that continued at 5.5%, very much with our own organic brands driving the growth with a strong performance in the quarter, really showing that the marketing and innovation initiatives that we have taken in the organic portfolio is basically paying off across all geographies. We saw a somewhat weaker growth of Contract Manufacturing, but that, again, is partially impacted by the fact that we have terminated contract manufacturing agreements out of Spain following the fire, but also obviously impacted by the B2B sales transition in Germany. Looking at Health Foods, we saw an organic sales development of minus 12.3%, partially impacted then by the move of launch window as well as promotional timing. And as I mentioned, a conscious sales planning decline on contract manufacturing as we optimize that portfolio for profit. And lastly, on the Consumer Health Products side, we saw an organic sales decline of 6.3%, partially as a consequence here also of optimizing for profit, which impacted certain brands negatively, but we also suffered some customer service challenges on some brands in the quarter, which temporarily impacted our ability to grow with demand, but this is something that we expect to come to terms with during the second quarter. Speaking then of the portfolio, just a couple of words on one exciting launch that we announced at the back end of the first quarter going into the second quarter, which is a range extension of Friggs tapping into the protein trend, launching protein cakes in our well-known and established flavors. High protein is one of the fastest-growing trends in the healthy snacking space. And with these new protein cakes in our well-known flavors, we're tapping into the trend of snacks that combine taste, convenience and function. It's a natural and protein-rich product with 23% protein based on lentils and peas, which are naturally high in protein. And we are in the process of launching and rolling these products out and making sure that we achieve strong launch visibility with media, digital challenge, PR, et cetera. And we're very excited to see this product roll out across the geographies in the Nordics. A few words on our gross margin. Starting with Nordics, where we saw a gross margin expansion by 1.1 (sic) [ 1.7 ] percentage points, partially then driven by a good net price management, which together with fairly stable raw material costs, then drove the margin expansion. We also saw, in the quarter, an improved product mix with a higher share of sales of our own consumer brands that also contributed positively. We saw a small negative impact from higher transport costs as a result of higher fuel costs, but in the end, not that material on an overall level and happy to see an improvement of the gross margin in the Nordics in the quarter. Looking at Division North, the sales segment mix, on the one hand, continued to impact positively with good growth on our own consumer brands and a reduction in parts of the less profitable B2B sales. However, this was not sufficient to mitigate the negative product mix development in contract manufacturing, as well as some spot purchasing raw materials that we had to do at higher prices to be able to fulfill commitments that have been made. We did pleasingly see a continued improvement of the production efficiency in the quarter, which also partially helped to recover that negative impact. And lastly, then looking at Division South, we saw a materially positive impact from sales mix with the growth in our own consumer brands, while contract manufacturing declined linked to the fire in Spain. We also saw an improved production efficiency which, in combination with a better mix, then achieved a material improvement of the gross margin at 4.5 percentage points in the quarter. I also just wanted to take the opportunity to mention a few words on the restructuring program. We talked about this in the context of the fourth quarter report. As mentioned then, we finalized the union consultations in the fourth quarter and fully implemented the program here during the first quarter. So as we exit the first quarter, we are fully implemented. Our estimate in terms of run rate savings remains at approximately SEK 20 million, which was what we communicated earlier. And as also communicated earlier, the cost to achieve was somewhat lower than communicated with the original announcement of the program at less than SEK 10 million. We did see the majority of this in quarter 4, but as Niclas will come back to, there were some effects also in the first quarter. I also wanted to take a minute to just mention a few words about the refined strategy for profitable growth that we launched in conjunction with the annual report that we published a couple of weeks ago. This very much builds on the updated strategy that we launched a couple of years ago. However, as a fairly new incoming CEO, it's natural to look at the long-term value drivers and evaluate any tweaks we might have to do, and we have done some refinements of the strategy to make sure that it helps us towards our financial targets. In practice, that means that our 3 pillars or gears, as you can see in the middle of the arrow on the top, have been clarified a bit. The first one then being to invest behind selected power brands, and what we mean by that is that we're really prioritizing investments into the selected brands where we see considerable potential for profitable growth, and that we will strengthen competitiveness with focused product development, marketing and sales execution, really making sure that we tap into the stronger brands where we have potential to make material steps forward, achieving growth that will have an impact on the group's results. The second gear here is to leverage our strong local positions. And what we mean by that is to innovate and support the local brands to really win and thrive in the prevailing market environment. In practice, we act with quite a broad portfolio of local brands, which face somewhat different competitive environments, also different consumer behaviors and different channel structures. And making sure that we approach those with agile plans that can tap into that potential is important. We will also then leverage the local ownership and decision-making, making sure that we make swift decisions close to the customer and consumer to win in the channel. And third then is to continue to drive cost of capital efficiency. So making sure that we tap into operational excellence, continuous improvement and ensuring a lean overhead structure to help us drive margin, but at the same time, drive the margin expansion with efficient and effective sourcing as well as a clear and focused approach to design to value. And then lastly, very importantly, to continue to drive for stronger cash generation with improved supply chain planning and steering. Also just a couple of words on the short-term priorities. Obviously, ensuring that we continue the focused implementation of the refined strategy to accelerate the growth towards our financial targets, continuing the margin expansion while improving the organic growth, most importantly in the first step of our own consumer brands. We will continue to leverage the growth momentum. We have a number of quarters now with growth on our own consumer brands, although it was modest in the first quarter, and we'll continue to leverage that and most notably, the healthy and strong growth we have on our own organic brands to continue the growth momentum going forward. And then lastly, making sure that we define the right long-term business model and production structure for a profitable business recovery in Spain, which is something that we'll come back to here later in the year. With that, I'm going to hand over to Niclas, who's going to take you through some of the details of the financials. Niclas, please.

Thank you, Henrik. Let me start with the financial summary for the quarter. Net sales declined by 4.7%, where currency had a negative impact of minus 3.4% and the organic growth rate was minus 1.3%. The gross margin improved by 1.2 percentage points and was positively impacted by improved efficiency, price increases and a good sales mix, where our own consumer brands, especially within the organic product range developed well. In consequence, EBIT (sic) [ EBIT margin ] improved by 1.1 percentage points, equivalent to SEK 8 million. Apart from the increase in gross margin, we saw a positive impact on EBIT from the cost reduction activities initiated in 2025. The net financing costs continued to improve versus last year, this quarter with SEK 3 million, mainly driven by the more favorable conditions in the new financing agreement. Our net result landed on SEK 82 million and was positively impacted by the insurance compensation of SEK 57 million following the factory fire in Spain last year. Cash flow from operating activities came in at SEK 34 million. This was in line with last year, however, lower than what could be expected considering the insurance compensation received, and the increase was mainly due to increase in net working capital. The quarter ended with a leverage of 0.9x, which was a substantial improvement versus both last year and year-end. Now moving over to the sales development for the quarter. And as already mentioned, net sales declined by 4.7%, or in absolute figures, SEK 44 million, where currency explains SEK 32 million, and the organic sales development was negative with SEK 12 million, equivalent to 1.3%. Although we saw overall negative organic growth, we were glad to see the organic product range performing really well with organic growth of 5.5%. Looking at the right side of this slide, our own consumer brands continue to grow, although at a somewhat slower pace than last quarter. Organic growth landed on 0.1% with our larger prioritized brands as top performers. The business-to-business branded business in Germany is still under transition to focus on profit over volumes and continue to decline in sales as a result, however, with positive effects on margin. Our licensed business declined by 2.2%, mainly referable to Consumer Health in the Nordics. And finally, our private label business continued to show good growth for North Europe, but the lower sales in Spain following the fire led to an organic decline for the group as a whole. Now let's have a look at the quarterly EBIT development compared to last year. Lower volumes resulted in SEK 5 million less contribution, but this was offset by a clearly higher gross margin of 1.2 percentage points, increasing gross profit by SEK 11 million. This improvement was driven by improved efficiency, pricing and a good sales mix. Sales and administration expenses was down a further SEK 1.8 million net in large due to the cost reduction program from 2025 and taking implementation costs into consideration. Our cost savings initiatives were fully implemented during Q1, and we expect full P&L impact from Q2 and forward. The FX effect from translation and revaluation was SEK 0.6 million compared to last year. And as a summary, our EBIT landed on SEK 45 million with a 5.0% margin, our third consecutive quarter with EBIT on or above the SEK 45 million mark. Moving over to the quarterly cash flow. And as you can see from the graph to the left, cash flow from the P&L statement was substantial, impacted by the insurance compensation received. This cash contribution was, however, largely offset by a working capital increase. The increase in working capital was mainly driven by inventory and accounts receivables. And if we start with inventory, the buildup was for several reasons. It was partly due to seasonality, partly to safety measures connected to the Middle East crisis and partly due to delay of launch windows within the trade. Accounts receivables were unusually high at quarter end. However, we expect a normalization during the second quarter. And to summarize, cash flow landed SEK 34 million, which was more or less in line with last year. And then moving over to my final slide, summarizing our cash and debt situation. Our quarter ended with SEK 804 million in available cash, which represents 22% of the last 12-month sales. Net debt declined to SEK 264 million, which contributed to the historically low net debt in relation to EBITDA quota of 0.9x. This is well within our financial target and confirms our strong financial position going forward. And with this, I hand back to you, Henrik.

Thank you very much, Niclas. So in summary, a quarter with strengthened gross margin, strengthened EBIT margin, weak growth of our own consumer brands, mainly driven then by our own organic brands. And with that, I hand back to the operator for questions.

[Operator Instructions] The next question comes from Alice Beer from ABG Sundal Collier.

Just starting off with a couple of questions on the gross margin and raw material prices. Firstly, could you quantify how much higher raw materials weighed on the margin in Q1?

Raw material prices in the first quarter were fairly stable and did not have a material impact on the gross margin. And that is, in our case, partly visible then in the gross margin improvement, what we refer to as the net price improvement, where we've been able to effectively take slightly more price out than we've had cost pressure coming in.

Okay. Great. And then following up on that. Looking back at 2022, when raw material prices last spiked, it was sort of a perfect storm with commodity inflation, energy costs, FX and these fixed price private label contracts you're in. I know that neither of you were with the company at the time, but could you give us some color of how much of the margin pressure at that time came from what? What I want to know is really that in the event that a similar situation would occur now, will your now lower share of private label contracts or different SKUs for brands sort of cushion the blow from higher prices?

So typically, yes, the pricing on our own brands is more within our control than pricing on contract manufacturing or licensed brands, typically. The second one is, a key driver of the margin dilution at the time was a relative long period from the movement on inbound price until price was taken into the market. And our perspective is that should there be a similar situation again, we stand much better equipped to act quicker. But let's be clear and state that we are not seeing any of those effects at the moment. However, I think general consensus in the industry is that should we have a protracted and escalating conflict in the Middle East, that will eventually result in inflationary pressures on food, which will impact not just us but the entire industry.

Yes. Okay. Great. And just last follow-up there. Could you tell us what proportion of your organic raw material contracts now are fixed and variable going into H2? And sort of at what oil or gas prices levels start to materially pressure your gross margins?

Yes. That is a very good question, which is very difficult to give a specific answer to. Typically, raw material is contracted based on harvest period. And typically, the coverage is until the next harvest period. However, given the wide array of organic products that we sell, and given how heterogeneous the origin of these products is, it's very difficult to answer that question in actually in a meaningful way. So typically, we have a number of months of coverage depending on the different harvest periods for the different products, and that will be at the oil price that was prevalent at the time that the contract was made.

Okay. Great. Moving on then, the report says that the long-term plan for Spanish operations will be established in H1. You don't really give an indication of which way you're leaning. Could you give us a sense of realistic scenarios, full rebuild, partial rebuild or permanent closure? And what are the key decision criteria there?

I think the key criteria for decision is going to be, one -- I guess the key driver is going to be capital and resource/focus allocation versus the opportunity. And what that means in practice is that we're assessing the opportunity for a long-term profitable business given the market situation and the competitive landscape. And against that backdrop and the competitive advantages that we have in the market, we will make an assessment and a decision based on how much capital and resource/focus that we think is appropriate to capture that. And at the moment, to be clear, the full spectrum for outcomes is still on the table. So the full range that you indicated before is still on the table.

All right. Moving on then, you flagged that the Q1 softness in Swedish Health and Consumer Health is part of a timing issue due to the shifted launch window. Could you quantify how much revenue was effectively pushed from Q1 into Q2, and give us any confidence that those sales are secured rather than the risk of being lost delayed further?

Yes. We want to be a bit cautious there and actually not quantify exactly how much it is, because we actually won't know that until we have seen the impact of that launch window fully. So we feel very comfortable that there is an impact, but we'd rather not quantify it in detail. we feel fairly comfortable, as I said, that with the launches that we have in that pipeline, one of which then is the protein cakes that we showed a little bit earlier that, that will be a strong period for us, but exactly how big remains to be seen here during April and May.

Okay. Fair enough. And then just a final question for me. It might also be hard to answer, but you've said that the Risenta acquisition will be margin accretive. But given that the brand is being acquired without its own production infrastructure and will be integrated into your existing facilities, could you give us a clear sense of what the expected EBIT margin is for Risenta once fully integrated and what the integration costs and time line will look like?

Yes, that was lots of questions in one. So we expect it to be EBIT margin accretive, and that means that the margin on an isolated basis will then be fairly strong in relation to what we have. But a strong driver of that is that we already possess a large part of the infrastructure and overhead cost that is required to operate the business. The gross margin of the business at current is slightly below our average gross margin the way it looks right now. But the EBIT margin accretiveness will be healthy, as I said, because it's integrated into a platform that already has a lot of the elements that are required to operate the brand. If you look at the time line, we're expecting to do a move towards the end of the third quarter or early in the fourth quarter of the production facility. But we obviously take over marketing and sales and the rights to the brand from the 1st of June and have a temporary service agreement with the current owner for manufacturing of the products until we have the opportunity to do the move and integration. So we expect it to be fully integrated, including the production by the end of the year.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you very much for listening in. I encourage you to go on our website, midsona.com, and read our recently published annual report, as well as follow us on LinkedIn for news and updates. Thank you very much and have a great day. We hereby close the conference.